Health reform: A consensus emerging in Asia?


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Amanda Glassman’s blog post on Ghana’s health insurance program and the firestorm it produced (hat tip to Mead Over) is a reminder of the passions that health reform debates still generate. This is intriguing because my sense is that while we health-reform aficionados are berating one another in the blogosphere, policymakers in Asia are quietly iterating toward something of a consensus on a whole swathe of key issues on health reform. The process isn’t always driven by hard evidence, but that’s because there isn’t much hard evidence either way. I certainly don’t see compelling evidence against the emerging consensus—if that’s what it is. And what’s emerging is rather interesting.

1) More general-revenue financing

The idea of getting people—especially poor people—to make major contributions for health coverage seems to be fading. In China’s rural health insurance program which started in 2003 and aims to cover all rural households, the government initially asked households to pick up around 20% of the bill; now it’s down to 10% or less. The very poor contribute nothing. In India’s Rashtriya Swasthya Bima Yojna (RSBY) scheme, which targets the poor in most of India’s states and dates from 2008, the household pays just a nominal registration fee to join the scheme (around 5% of the combined registration fee and premium); the premium is paid by the taxpayer. In Andhra Pradesh’s Rajiv Aarogyarsi scheme, which started in 2007, the aim was initially to cover just the poor at the taxpayer’s expense; now virtually the entire population is covered. Indonesia’s Jamkesmas scheme which dates from 2008 covers the poor and nearpoor at the taxpayer’s expense. In the Philippines, “indigents” have been covered at the tax-payer’s expense since 1997 though it wasn’t until 2004 when there was a major push to cover all indigent households. In Thailand, everyone who isn’t a civil servant or formal-sector worker pays nothing under the universal coverage (UC) scheme which was launched in 2001. And in Vietnam’s health care fund for the poor which started in 2002, the taxpayer pays 100% of the enrollment cost; the near-poor pay 50% or less.


In these six Asian countries, over one billion people (around 40% of the population) have been covered by these new programs but have been asked to pay very little if anything toward the cost (see map for my estimates of coverage). In China, Indonesia and Thailand, the schemes extend well beyond poor families; this is true of Andhra Pradesh too, and to a lesser extent Vietnam.

2) More arms-length ‘purchasing’

All six Asian health financing programs entail a move away from the traditional model of general revenues being channeled through a health ministry to pay budgets and salaries to government health facilities. In China, a new entity—the new cooperative medical scheme—was set up within the health ministry with offices at the facility to deal with payments, based initially on a fee-for-service (FFS) basis but in some areas increasingly through prospective payments. In several parts of China, the scheme is now being operated by the agency that runs the health insurance scheme for formal-sector workers, albeit as a separate program. In India, the RSBY is operated by the ministry of labor, and the day-to-day running of the scheme is contracted out to private insurers on a competitive bidding basis, as happens in Andhra Pradesh; providers are paid on a DRG-type basis. In Indonesia, the health ministry runs the program, but providers are paid capitation at primary level and negotiated fees at secondary level. In the Philippines, the social health insurance agency, PhilHealth, pays providers through a FFS system. In Thailand, a semi-autonomous national health security office oversees the UC program, and pays providers through a mix of capitation and DRGs. Finally, in Vietnam, cover is organized through the social security agency that reimburses providers mostly on a FFS basis but in some areas through capitation or DRGs.

The tax-financed coverage expansion in these countries was thus used as an opportunity to create a wedge between the provision of health care and its “purchasing”, and to alter the way providers are paid by shifting to a performance-related payment system.

3) A reduced emphasis on government provision

While all countries appear to be firmly moving toward a greater role for government in the finance of health care, many are firmly reducing the emphasis on government in the provision of health care. In India, private hospitals are contracted by both the RSBY and Aarogyarsi schemes. (In India’s case, as already mentioned, the role of government has been scaled back too in the purchasing of health care.) In Indonesia, 30% of hospitals contracted in the Jamkesmas scheme are private. In the Philippines and Thailand, private hospitals provide care to those covered at the taxpayer’s expense. This is starting to happen too in Vietnam, though not in China where in any case the distinction between public and private is somewhat blurred.

4) An emerging model with merits?

The coverage expansion in these countries was thus not just about expanding coverage and delinking provision and purchasing with performance-related payments; it was also about bringing in the private sector to provide care to people whose coverage is being financed by the taxpayer. Asia’s recent health financing initiatives are living proof of the point many of us have tried to make over the years—financing health care one way (e.g. through general revenues) doesn’t limit the choices open to you in delivering health care.

The shift away from contributions is potentially good for equity because it delinks entitlements and ability-to-pay. The schemes don’t eliminate out-of-pocket payments altogether, of course, because the coverage isn’t always comprehensive (schemes like RSBY focus on inpatient care and most don’t cover OTC drugs), and copayments are levied (copayment rates initially in China were well over 50%). But the trend to public finance seems a good one from both equity and efficiency perspectives.

The purchaser-provider split and the shift to performance-based payment have their champions, and there are certainly reasons to hope that such approaches could improve efficiency. But one would certainly be naïve to think that they are problem-free—a purchaser-provider split is costly to operate, and performance-related payments risk incentivizing providers in the wrong direction. That said I don’t think we can say the jury has returned with a verdict either way, on either idea. Asia’s experiences will help the jury make up its mind.

Allowing private providers to deliver publicly-financed care is an interesting twist. Much of the passion surrounding the role of the private sector in health care arises in the context of patients paying private providers out-of-pocket or through private insurance. The concerns that arise there (e.g. ill-informed patients being exploited financially by better-informed providers) seem likely to be less of an issue when the care is being financed by the taxpayer.

So, while we aficionados have been debating health reform passionately among ourselves, Asia’s policymakers have quietly got on with the business, and have come up with a rather interesting model. It’s work in progress, of course, and not without its challenges. But it might just be a model that a lot of policymakers might like. Let’s see if it works!



Adam Wagstaff

Research Manager, Development Research Group, World Bank

Join the Conversation

Benjamin Loevinsohn
April 12, 2011

Very sensible blog Adam!! It's interesting how reality can interfere with a good fight in the blogosphere!!

Anil Swarup
April 13, 2011

Having been engaged in the implementation of RSBY for the past three years, I found the paper quite interesting. There had indeed been "paralyses of analyses" with regard to the issues relating to health insurance and the wait was turning out to be a painful one. There are no perfect models and there will be none in the future. Hence, the schemes were launched. The RSBY has so far covered more than 23 million families and more than 1.6 million persons have already availed benefits under this smart card based cashless health insurance scheme. As various processes under the scheme have stabilzed, the scheme has been extended to those that are prepared to pay the premium. So far, more than 150,000 families have paid the premium and are riding the platform. This scheme is different from what is happening in China, Vietnam and Indonesia. It is also different from "Arogyashree" which focuses primarily on tertiary care. What makes RSBY really different is the use of technology that enables a daily assessment of what is happening in the field. The initial independent evaluations have revealed a consumer satisfaction ranging between 70 and 90%. The scheme has still a very long way to go and there are huge challenges in terms of out-reach, capacity building, ensuring quality and fraud control. However, the initial signs are pretty encouraging in terms of improved access to health care, reduction in OOPE, gender bias in favour of women, improvement in health care infrastructure and a smart card based platform that has the potential to revolutionize delivery of variety of services to the poor.

Nachiket Mor
April 13, 2011

Dear Dr. Wagstaff,

I wonder if while at first glance these developments do look like they all are headed in some sort of common direction, in reality they are actually doing some very different things and perhaps not all of them will end up producing the best possible outcomes:

1.My understanding is that, no matter who pays for it, approximately 70% of the health expenditure is at the primary level, about 15% is for secondary care and about 7.5% is for tertiary care. The RSBY is focussed on the 15% while the Rajiv Arogyasree is trying to address the 7.5%. Both schemes do not really touch the 70% number, leaving it for a combination of private provision paid for on an out-of-pocket basis and free government provision. Schemes in other countries seem to focus much more sharply on the challenges in primary care area and I wonder if that is not indeed where much of the debate still rages and if how that is dealt with is not the key to the long-term success or failure of any Universal Health Care programme.

2.On the issue of “arms length” purchasing isn’t an important aspect of the debate centred on competition between purchasers (as implied by the use if insurance companies to act as purchasers on behalf of the government) versus competition between providers. It is my understanding that while there is general agreement that the latter approach has the potential to produce good outcomes in the long run there are still doubts about the desirability of the former approach. Once again the countries seem to differ significantly on this dimension.

3.On the issue of reduced role of the public provision (by design) I wonder if once again there isn’t actually quite a sharp difference in the manner in which countries are trying to address this. While several may be increasing the role of the private sector in tertiary care, in primary care (and to some extent in secondary care) it would appear that there is actually quite a sharp divergence between the choices made by different countries.

At a design level is it perhaps the case that some countries are moving closer to a “managed care” type environment with mandatory gate-keeping and attempts at much sharper linkages between various levels of care while others are moving towards much more fragmentation and letting uninformed user demand actually dictate outcomes with few, if any, design principles at work. Is it therefore possible to argue that the real differences in longer term wellness and cost outcomes between countries will actually emerge not from the relative roles of the private sector but from the manner in which they have been able to integrate various levels of care and how much attention they have paid to primary care? And, given the very long-term nature of health outcomes, is it also possible to argue that those countries have relied on market based and consumer led designs may perhaps superior shorter-term outcomes because of improved “accountability” but in the longer-term see costs go out of control and wellness levels plummet.

I would be eager to get your guidance on these questions.


Nachiket Mor

Dr. Rahul Reddy
April 14, 2011

I found the blog very interesting. It represents a balanced opinion on the ongoing reforms. Though there are shortcomings in structure of the programs, their coverage and payment mechanisms, its a good start. Politicians and policy makers have reconized the challenges faced in government's direct provision of health care and the growing influence of private sector. They realised the need to function differently to address health needs of vulnerable populations. They have aptly accepted their stewardship role in the health system. I believe government or a authoritative body is a better negotiater/ purchaser for affordable , quality health services rather than an individual.

Adam Wagstaff
April 15, 2011

Dear Dr Mor

Many thanks for your very thoughtful comment. My apologies for the delay in replying. Let me try to answer your questions.

1. I think it’s probably fair to say that most if not all of the schemes I discussed were motivated by a desire to improve financial protection, i.e. to reduce families’ exposure to the risk potentially catastrophic health spending. The presumption has often been that this type of spending comes from health events that are relatively rare but are very expensive when they occur, such as a hospital inpatient episode. Some schemes have, as a result, been somewhat tilted toward hospital care, with either no or limited risk-pooling for the costs of non-hospital care. Not all schemes have this characteristic, and some have broadened their coverage since their inception. One reason is that the analysis of household data often shows that relatively rare health events can result in a steady drip-drip-drip of spending (e.g. on drugs) that mounts up to a major outlay over time for a household. Another is that many inpatient admissions are for so-called “ambulatory care sensitive conditions”; the agency carrying the financial risk has an incentive to reduce these by investing in preventive care and getting chronic conditions managed out of hospital. This raises questions of how the arms-length financing agency pays first-level providers so as to incentivize them appropriately; neither fee-for-service nor plain capitation quite does the trick. Much of the current discussion and experimentation on the ground is on this issue.

2. I think it’s important to distinguish between competing in a market and competing for a market. The RSBY model is the latter if I understand it correctly—insurers compete through a tendering process to be the sole ‘purchaser’ for a specific period of time (three years, it seems) for a specific geographic area (usually a state, it seems). This is different from the more typical situation that some economists worry about where multiple insurers compete with one another contemporaneously in a market; that situation is argued to be vulnerable to risk-selection behavior by insurers, though the size of the problem is hotly debated and likely varies according to the regulatory environment, social attitudes, etc. This risk is avoided in the tendering model, which could carry its own risks (e.g. a reluctance to invest), though these risks are likely to be reduced by having insurers re-compete after the end of the contract, and giving them multiple markets to compete for. The Indian approach to contracting out the ‘purchasing’ function to the private sector may not be unique (I heard a while ago about a local government in China that did something similar), but it’s on a much grander scale and it’s quite different from what’s being pursued elsewhere. I suspect there are a lot of us watching it closely.

3. I think you’re right that there’s less variation across the countries in the degree to which ‘purchasers’ contract with hospitals than with first-level providers. In 2005, PhilHealth contracted with more private providers at all levels including primary care. In China, a large fraction of village clinics and a smaller fraction of township health centers are private though not necessarily “purely” private; many are contracted by the rural health insurance scheme but this doesn’t seem to happen in all jurisdictions. Indonesia’s Jamkesmas scheme currently seems to contract with private hospitals but not private first-level providers. My guess is that these differences reflect different starting points in terms of the public-private mix, and that these new schemes may foster changes in it; over time I suspect we’ll see some convergence and blurring of the distinction between public and private as has happened in industrialized countries.

4. I’m actually quite struck by the similarities across the different schemes, and by the fact that governments seem to be committing large amounts of government revenues to providing financial protection for at least the poor if not families further up the income distribution too, through a system that involves a government agency or government-contracted agency taking responsibility for purchasing their care and ensuring its quality and appropriateness.

Best wishes,

Adam Wagstaff

Adam Wagstaff
April 15, 2011

Dear Mr Swarup,

Thanks for the comment. I think you're absolutely right to be proud of RSBY's IT system which is indeed cutting-edge. My guess is that a good information system is likely to be crucial to the operation of this emerging model of a health system, as well as its evaluation. Of course, the data give us only a partial picture of the health system (use among users and among enrollees, and data on contracted providers), and will therefore need to be completed by other data for systemwide monitoring and evaluation exercises. But it's a great start!



Anil Swarup
April 15, 2011

I agree with the views expressed by Nachiket. I would even go a step further. Even more important than OPD is preventive care. The issue is whether insurance is the right instrument to handle preventive care and OPD. In countries like India, perhaps very difficult, if not impossible. RSBY has gone in for an easier option of initially covering only in-patient health care( health insurance, in any case is quite complex). Now an experiment, with the assistance of ILO, is is underway to see whether the technology used under RSBY can come handy for extending the scheme to provide OPD cover. If it works, it would be a big breakthrough in the context of providing a greater choice to the beneficiary in seeking such services and, thereby, improving the quality of services. This is already becoming evident under the on-going scheme for in-patient care. However, it needs to be clarified that the role of the government will not be limited to providing funds. The private sectore out-reach is still quite limited. The key is how private businesses and public health care system can be incentivised to participate in the whole process of providing health care. Can there be a performance based incentive for the public health care system to deliver what it is supposed to? RSBY is not only attempting to incentivise private businesses but also to evolve a performance based incentive structure for public health care system. Only time will tell whether it works.

May 31, 2011

Dear Adam,

Wonderful post! I am contributing to a global review of health insurance programs in developing countries and this blog entry provided a lot of background information. I am a little surprised by the color scheme you chose -- green for low coverage and red for high. Maybe the other way around would be more intuitive?

Best regards,

Xiaodong Cai

June 17, 2011

All these health reforms, the Obama Health reform in USA, now the health reforms in Asia, demonstrate that the old European social model is not "out of fashion". Just beside inequality of earnings stands the inequality of non monetary conditions such as health insurance coverage and access to health cares. In France people benefit from universal coverage since many years. Welcome to Asians and American!!